Research paper finds music piracy ‘benefits’ album sales

By Stephen C. Webster - RAW Story
Friday, May 18, 2012

 

Illegally downloading pre-release leaks of major artists’ albums actually “benefits” first week sales, and if used properly these types of leaks could even work as an effective promotional tool for the largest record labels going forward, according to findings in the first draft of a working paper put out this month by an assistant professor at North Carolina State University.

However, the study (PDF) is not necessarily the godsent revelation advocates of file sharing and copyright reform may have been hoping for. Speaking to Raw Story on Friday, Asst. Prof. Robert Hammond, a Ph.D. graduate of Vanderbilt, cautioned that his results should not be construed to contradict the economic analyses put forward by music industry lobbyists in discussions with lawmakers.

Nevertheless, his study does pack a punch: “The findings suggest that file sharing of an album benefits it’s sales. I don’t find any evidence of a negative effect [from piracy] in any specification, using any instrument,” he wrote.

In fact, his study found that effect goes in the opposite direction: Hammond noted that the sales-boosting effect of piracy was most pronounced in cases where a major band’s album had been leaked online ahead of the official release. However, the overall amplification effect was relatively small, producing about 60 additional purchases in cases where an album was leaked to pirates up to 30 days before its official release.

“My results suggest that it’s possible to think of leaks as promotional activity, but more work needs to be done to understand how general that result is,” he told Raw Story.

He also noted that download data he used came from a “very small” BitTorrent tracker, and that the sales boosting effects could be more pronounced if data from some of the larger trackers were examined. Despite the size of his download tracker, Hammond told Raw Story that it actually offered him more detailed data than any other prior studies on the subject, revealing a previously unidentified correlation between downloads and sales.

Cross referencing that download data with music industry sales figures, Hammond was able to pinpoint key similarities. Namely, major bands are always downloaded the most, and they almost always see the biggest sales. Hammond found that these artists also saw the greatest benefit from pre-release file sharing. While that benefit may be relatively small, the popularity trend carried over to the genre level, with with pop albums seeing the greatest benefit, whereas independent artists or newly released groups saw none.

But that’s where the good news for copyright reform advocates ends: “What I find are individual downloads of an individual album are not harmful to individual sales,” he said. “That does not imply that if we aggregate all the downloading and all the sales, that more downloading, for the industry, means more sales for the industry.”

Hammond continued: “So much of the [recent] failed [Internet] legislation was driven by lobbying activities at the industry level. Nothing in my paper says those lobbyists and those industry level organizations are wrong in their claims. There has certainly been a steep drop in profitability in that industry. My results are on a very different question and so my ability to inform policy in that regard is somewhat limited.”

That steep drop-off in profitability remains a prescient reality for record companies even despite the emergence of online services like iTunes and Spotify, which have seen subscription numbers soar in recent years. Even in countries like France, where U.S.-supported Internet restrictions have significantly cut down on piracy, the music industry’s profits have continued to shrink year to year.

Explaining that the “appropriate” role of copyright is not a topic he’d care to address, Hammond added that his study simply does not address the “industry-level question” of the potential for harm posed by piracy.

Some of those industry analyses, however, seem to inflate the overall damages of piracy by attributing direct losses per download, as if to assume that the downloader would have otherwise purchased the item that is being shared with them. Rob Reid, creator of the online music service Rhapsody, explained in March during a speech to TED Talks why this is actually rather absurd.

“These days, an iPod classic can hold 40,000 songs… Which is to say, eight billion dollars worth of stolen media, or about 75,000 jobs,” Reid said. “Now you might find copyright math strange, but that’s because it’s a field that’s best left to experts.”

“So, putting my work in that context says that what’s good for an individual artist seems to be very different than what’s good for the industry,” Hammond concluded. “I imagine policy makers are more concerned with the industry than the individual artists.”

Copyright enforcement and the Internet: we just haven't tried hard enough?

By Timothy B. Lee - Ars Technica

On Tuesday, Mother Jones blogger Kevin Drum suggested that we don't have effective copyright enforcement on the Internet because we just haven't tried hard enough:

Something that's good enough to provide a measure of IP protection that works for the vast majority of non-supermen and isn't too unwieldy. Is that really any more unlikely than the invention of the internet itself? I'm not sure why. 

This is not something you want to believe if, ideologically, you're opposed to IP protection because you think that digital content is fundamentally different from meatspace content on the grounds that making a digital copy of something doesn't reduce anyone else's ability to use their copy. But neither does copying a book. That's never been the point of IP law. It's always been about the income stream an author can get from selling copies of his or her work, and that's exactly the same in the digital world as it is in the physical world. The arguments in favor of IP protection are much the same in both domains.

You might not want to hear that, but just because you don't want to hear it doesn't mean it's not true. The truth is that IP protection in the digital world might very well be possible. We won't know until we try, making a whole lot of mistakes along the way. If you want to argue that IP protection is a bad idea, then fine. Make the argument. But don't pretend that your preferences are also technological certitudes. They aren't.

The phrase that jumped out at me was "we won't know until we try." Among people who don't pay close attention to technology issues, there seems to be a widespread impression that the copyright debate pits those who think we should enforce copyright against those who are ideologically opposed to copyright protection. But the reality is that we've been "trying" to crack down on illicit file sharing for at least two decades, granting copyright holders stronger and stronger enforcement powers and devoting more and more taxpayer dollars to the effort.

This might not be obvious to those who only write about these issues on occasion. So in the interest of a better-informed debate, here's a partial list of significant US anti-piracy efforts made over the last couple of decades:

• 1992: Congress passed the Audio Home Recording Act, which mandated that digital audio devices have copy protection baked into them, and it also imposed a tax on blank media to offset harms from digital piracy.

• 1997: Congress passed the No Electronic Theft (NET) Act, which jacked up statutory damages for copyright infringement.

• 1997: The recording industry tried to sue the first MP3 players out of existence. Fortunately, courts argued that "space shifting" is a fair use. (This was a sequel to Hollywood's effort to have the VCR declared illegal on copyright grounds in the early 1980s.)

• 1998: Congress passed the Digital Millennium Copyright Act (DMCA), which effectively gave Hollywood the power to control the design of entertainment devices; all that was needed was to link new technologies with particular DRM schemes. Manufacturers couldn't crack the DRM, thanks to the new law, so they had to take out a license for its use, complete with a whole set of unrelated conditions. This is why, for example, most DVD players will refuse to fast-forward through commercials in a DVD if the publisher sets the "don't allow fast-forwarding" flag. Hollywood has used its rights under the DMCA to create a licensing regime for DVD players that allows it to micro-manage the design of DVD players, and consumer electronics firms that try to create a DVD player without Hollywood's permission are subject to civil and criminal penalties.

• 2000: The recording industry forced My.MP3.com out of business. My.MP3.com was one of the first "cloud music" services. It wasn't a file-sharing site. Rather, it allowed users to listen to their own music collections while on the road. The decision probably delayed the emergence of cloud music services like Google Music and Amazon Cloud Player by a decade.

• 2001: The recording industry successfully forced Napster out of business.

• Early 2000s: Under pressure from Hollywood, most states adopted laws criminalizing recording movies with camcorders.

• 2003: The recording industry began suing individual file-sharers, a process it continued for at least five years.

• 2004: Hollywood sued Kaleidescape for creating a "DVD jukebox" product that allowed users to rip DVDs and stream them to various devices around their household. That litigation is ongoing, and likely prevented the emergence of similar products.

• 2005: content companies shut down the file-sharing service Grokster and several of its competitors after a lengthy court battle.

• 2007: Hollywood sued MP3tunes, another cloud music site by the same guy who created My.MP3.com. The courts mostly sided with MP3tunes in 2011, but the case is ongoing.

• 2008: Congress passed the PRO-IP Act, which gives the government the power to seize US-based domain names after a one-sided ex parte legal process similar to the one used to seize the property of drug dealers. The PRO-IP Act also jacks up the penalties for other copyright offenses, and it created a new "IP Czar" position in the executive branch.

• 2010: The federal government began seizing domains of accused pirate sites using the powers granted by PRO-IP. The program has resulted in several dubious seizures and a couple of outright errors, though has also taken down sites like NinjaVideo in advance of prosecution and later guilty pleas from its principals. 

• 2011: The US government sought the extradition of a British college student for operating a "link site." Neither he nor his servers were located in the United States during the time he ran the site, and it's not clear if he violated British law.

• 2011: Under pressure from the Obama administration, major ISPs adopted a voluntary "graduated response" system in which they will soon play a more active role in enforcing copyright on their networks.

• 2012: The United States raided and shut down Megaupload, a file-hosting site that hosted a lot of infringing content and was one of the most heavily trafficked sites in the world. The principals of the site were arrested and at least their CEO has been denied bail.

This is a partial list, focusing on the most significant anti-piracy efforts undertaken in recent years. To be clear, my point isn't that all of these policies are bad. I think the case against Napster and Grokster was pretty strong (and said so at the time in the case of Grokster). The US version of the "graduated response" system seems fairly reasonable to me, and I haven't always found locker and link sites' legal arguments persuasive.

But the broader point is clear: every item on this list has imposed costs on third parties. Technologies with clear non-infringing uses have been pushed out of the market. Innocent parties have had their websites shut down. A woman was arrested for filming a birthday party that happened to occur in a movie theater. Angel investor Paul Graham has said he avoids funding music-related startups because the record labels are "effectively a rogue state with nuclear weapons." And most of these enforcement efforts costs taxpayer money.

Individually, none of these things might be worth getting upset over. But in the aggregate, they reflect a disproportionate focus on the interests of a handful of large companies. It's hard to think of a single example during this twenty-year period of copyright restrictions being repealed, relaxed, or any in any meaningful way liberalized. Reform proposals like the orphan works bill have languished.

Drum suggests that opposition to further increases in copyright enforcement comes from people who are "ideologically opposed to IP protection." But most of us are not anti-copyright; we just think enough is enough, and that the menu of enforcement tools Congress has already given to copyright holders is more than sufficient. We're tired of the constantly increasing copyright enforcement efforts because most of the costs of the "mistakes along the way" fall on innocent consumers, innovators, and taxpayers.

‘World’s Worst Director’ sues thousands over illicit downloads

By Muriel Kane
Sunday, June 13th, 2010

The long-running debate over Internet file sharing seems certain to be renewed as a result of litigation filed by a Washington, DC legal group against more than 14,000 unidentified "John Does," who are alleged to have downloaded movies from various independent producers using BitTorrent.

According to the Washington Post, attorneys for the US Copyright Group say their goal is to save the film industry from copyright pirates, but the three advocacy groups which have filed a friend-of-the-court brief (pdf) in the case charge that they're only in it for the money.

"These are organizations that are formed for the purpose of suing, and they view the legal system as a system for making money and then use it to fund additional lawsuits," Electronic Frontier Foundation (EFF) attorney Jennifer Granick told thePost. "At least the RIAA was a real organization," she added.

Adding to the interest value of the case is that the most prominent of the filmmakers behind the suit is Uwe Boll, widely known as "the world's worst director."

"This month, Boll found a new revenue source: mass lawsuits against P2P downloaders in US federal court," Ars Technica reported in April. "The first suit from Achte/Neunte Boll Kino Beteiligungs GmbH targets 'Does 1-2,094' over their alleged sharing of Far Cry on BitTorrent networks. The move is part of a new international approach to recouping some of the money believed lost to online piracy. It is spearheaded in the US by a new entity calling itself the US Copyright Group, which has filed a host of such lawsuits in recent weeks against P2P users, mostly involving smaller independent films. The Hollywood Reporter first noted the lawsuit campaign, which isn't designed so much to stop piracy as to monetize it."

"Boll's specialty is optioning gaming franchises with built-in name recognition," Wired explained in 2006, "then somehow managing to snag high-profile actors.... He is also a savvy businessman. His production company, Boll KG, exploits a German tax loophole, so even when he films an English-language movie in Canada ... his financiers get a fat write-off from the German government."

"Like a modern-day Ed Wood, or a poor man's Michael Bay," the story continued, "Boll appears competent in every aspect of filmmaking except the actual making of the film. His movies are haphazardly scripted, sloppily edited, badly acted and, most crucially, brutally received. Out of 350,000-plus films rated by users of the encyclopedic movie site Internet Movie Database, Boll's three game flicks all rank in the bottom 100. Critics, especially the legion of armchair Eberts who post scathing reviews on the Web, have made a sport out of beating up the director."

The US Copyright Group, which is leading the lawsuits, began by identifying the Internet addresses of thousands of individuals who had downloaded movies from filesharing websites and then subpoenaed their service providers to obtain their identities. Verizon and Comcast have complied with the subpoenas, and some of those receiving "pre-litigation cease and desist orders" have already chosen to pay $1500 to $2500 to settle out of court, rather than face a potential penalty of $150,000 per download.

Time Warner Cable, however, is resisting the subpoena on the grounds that it would be burdensome and costly to supply the requested data, and the brief filed by EFF, Public Citizen, and the Washington chapter of the American Civil Liberties union is intended to support Time Warner in the case.

The primary argument raised by the advocacy groups is that there is no justification for filing a single case against thousands of individuals who are linked only by having downloaded the same movie. "By requiring those sued to defend these cases in D.C., regardless of where they live, and by having thousands of defendants lumped into a single case, the USCG has stacked the deck against the defendants," EFF attorney Corynne McSherry explained.

The brief also raises the issue of online anonymity, noting that "robust protection for the right to engage in anonymous communication -- to speak, read, view, listen, and/or associate anonymously -- is fundamental to a free society. ... Courts in this District have recognized that First Amendment protections extend to the anonymous publication of expressive works on the Internet even where, as here, that publication is alleged to infringe copyrights."

It further notes that courts "have recognized that ... at the outset of the litigation, the plaintiff has done no more than allege wrongdoing, and mere allegations generally do not overcome a privilege. They have further recognized that a serious chilling effect on anonymous speech would result if Internet users knew they could be identified by persons who merely allege wrongdoing, without necessarily having any evidence thereof, or any intention of carrying through with actual litigation."

Eircom to cut broadband over illegal downloads

by JOHN COLLINS

EIRCOM will from today begin a process that will lead to cutting off the broadband service of customers found to be repeatedly sharing music online illegally.

Ireland is the first country in the world where a system of “graduated response” is being put in place. Under the pilot scheme, Eircom customers who illegally share copyrighted music will get three warnings before having their broadband service cut off  for a year.

The Irish Recorded Music Association (Irma), whose members include EMI, Sony, Universal and Warner, reached an out-of-court settlement with Eircom in February 2009 under which the telecoms company agreed to introduce such a system for its 750,000 broadband users.

The mechanism by which it operates was challenged in the courts by the Data Protection Commissioner.

Mr Justice Peter Charleton ruled in the High Court that a broadband subscribers internet protocol (IP) address, which Eircom will use to identify infringing customers, did not constitute personal information.

It is understood that, during the pilot phase, Eircom has agreed to process about 50 IP addresses a week. Irma is using a third-party firm, Dtecnet, to identify Eircom customers who are sharing, and not simply downloading, a specific list of its members’ copyrighted works on peer-to-peer networks. The operation of the scheme will be reviewed after three months.

Dick Doyle, director general of Irma, said his organisation could potentially supply Eircom with thousands of IP addresses a week but it was a matter of seeing what the internet service provider (ISP) was able to process.

Infringing customers will be initially telephoned by Eircom to see if they are aware of the activity on their broadband network. If the customer is identified a third time, they will have their service withdrawn for seven days. If they are caught a fourth time their broadband connection will be cut off for a year.

Mr Doyle said international research suggested 80 per cent of people will stop illegal file-sharing if they get a letter from their ISP warning them of the consequences. “We are trying to encourage people to go back to legitimate networks to get their music,” he said.

Record companies are lobbying to have a graduated-response mechanism enshrined in law in other jurisdictions.

Cable operator UPC has resisted requests from Irma to implement a “three strikes” system and the case is in the courts next month. Last night, a spokeswoman for UPC said it does not see any legal basis for monitoring or blocking its subscribers’ activities.

File-Sharers are Among Industry's Biggest Paying Customers

File-sharers are content industry's "largest customers"
By Nate Anderson |

Drawing on a major study of Dutch file-sharers, Prof. Nico van Eijk of the University of Amsterdam concludes, "These figures show that there is no sharp divide between file sharers and others in their buying behaviour. On the contrary, when it comes to attending concerts, and expenses on DVDs and games, file sharers are the industry's largest customers... There does not appear to be a clear relationship between the decline in sales and file sharing."

In fact, the study found that file-sharers often buy more content, especially when it comes to films and games.

Differences in purchasing behavior between file sharers and non-file sharers

	Music	Films	Games
Buyers in the past 12 months: yes/no	No difference	No difference	File sharers buy more often (61% vs. 57%)
If a buyer in previous 12 months: number	No difference	File sharers by more (12 vs. 8 films)	File sharers buy more (4.2 vs. 2.7 games)
Related products	File sharers visit concerts more often and buy more merchandise	No difference in cinema visits	No difference in buying merchandise

Source: Communications & Strategies

Van Eijk's conclusions appear in a recent paper for the journal Communications & Strategies (PDF), one coauthored with Joost Poort and Paul Rutten. While van Eijk doesn't deny that specific industries (like recorded music) have been in decline, he paints a more complicated picture of the content industries as a whole.

For instance, Sweden has long been regarded as a worldwide piracy hub—it's home to The Pirate Bay, the VPN IPRedator, and it sent a member of the Pirate Party to the European Parliament. But van Eijk draws on 2009 research showing that "total revenues [in Sweden] from recorded music, live concerts and collecting societies remained roughly stable between 2000 and 2008."

That doesn't help the recording industry, however, unless music labels get a cut of revenues from live music and merchandise. That's exactly what has started to happen via so-called "360 deals" over the last few years, where labels will invest in recording and promotion budgets for bands, but only when they benefit from all parts of the band's revenue stream.

Van Eijk sees this as a necessary business model change in response to file-sharing, but he argues that far more innovation is needed. And he blasts the music industry in particular for acting out of fear. Labels tried to "stem the tide of unlicensed music file sharing with their conservative strategy of abstaining from innovation, promoting legal measures against supposed offences, and digital rights management," he wrote.

"This strategy resulted in the current backlash, providing space for a new entrant establishing a major brand in the online music business: Apple's iTunes. Reinvention of the business model looks like the only way out for the traditional players in the music industry."

If you attend music industry conferences, you never have wait long for someone to say that we have entered an age in which people are unwilling to pay for content; that is, traditional business models are dead.

Van Eijk still sees life left in direct content sales, but he notes that current prices are far out of line with consumer expectations. When file-sharers were surveyed about what a "reasonable" price would be for an album, a movie, and a video game, the answers were surprising. A full 75 percent of file-sharers thought €8 was appropriate for an album—not too far off from current pricing.

Bad Publicity Forces Lawyers Out of Anti File-Sharing Cases

Bad Publicity Forces Lawyers Out of Anti File-Sharing Cases
Written by enigmax on April 10, 2010

A British law firm, which only recently entered the file-sharing settlement letters business, has withdrawn due to masses of bad publicity. Tilly Bailey & Irvine, who tried to rewrite history on its Wikipedia page to remove its connection to this work, say that they fear the rest of their business could be damaged.

Following the likes of Davenport Lyons and more recently ACS:Law, lawyers Tilly Bailey & Irvine (TBI) made their first steps into the file-sharing settlements market this year.

Since TBI has been around for some 170 years, appeared to be a traditional law firm with previously good reputation, but was now publicly representing porn-industry clients in a controversial practice, TorrentFreak earlier asked the company the following question:

“Taking into consideration that when operating almost identical schemes both ACS:Law and Davenport Lyons became the subject of SRA investigations, coupled with the Lords labeling this type of scheme “legal blackmail“, are Tilly Bailey & Irvine concerned about tarnishing their hard-earned reputation?”

TBI declined to answer this and the rest of our questions but were quickly labeled by the UK Lords discussing the Digital Economy Bill as “new entrants to the hall of infamy” and their activities labeled “an embarrassment to the rest of the creative rights industry”.

The pressure continued to build when settlement letter recipients wrote complaints to the Solicitors Regulation Authority (SRA) so it didn’t really come as a surprise when we discovered TBI had been trying to re-write history by modifying their Wikipedia page recently.

At the time we wondered if this meant the company had abandoned its action against file-sharers. That question has now been answered by UK consumer group Which?

In a letter sent to the SRA on April 1, TBI wrote: “We have been surprised and disappointed at the amount of adverse publicity that our firm has attracted in relation to this work and the extra time and resources that have been required to deal solely with this issue.

We are concerned that the adverse publicity could affect other areas of our practice and therefore following discussions with our clients, we have reluctantly agreed that we will cease sending out further letters of claim.”

Deborah Prince, head of in-house legal at Which? said that she is really pleased that TBI has seen sense and left this arena.

“Hopefully, other law firms thinking of going down a similar route will begin to realise that although this work can generate vast financial rewards for law firms and their clients, it can also bring a lot of adverse publicity simply because the practice is inherently unfair and unethical.”

Consumer group BeingThreatened.com, who have worked relentlessly to assist those sent letters by TBI, ACS:Law and Davenport Lyons, also welcome the news, but want TBI to go further.

“We are cautiously optimistic that it marks the end for the innocent people who have been in touch with us to complain of the accusations. However, we believe that an apology is owed to those individuals, and would encourage TBI to come forward and say sorry,” they told TorrentFreak

“They’ve already taken the difficult step of admitting to their error, this extra step would serve to restore some confidence that the legal system is not merely there to be abused for making money through volume litigation against the innocent and unaware.”

With this announcement by TBI, only ACS:Law remain in this type of business in the UK, so are they concerned about damage to their reputation? Absolutely not. We’ll go into more details in our report next week.